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Partial exclusion of capital gains on sale of home?

I bought my first home in 1990. 

On Aug 3 2018 I bought a 2nd home with intention of making it my primary residence. 

From August 2018 to December 2018 I spent significant time at both homes.  There were a few repairs to be done at the 2nd home and I moved slowly, finally vacating the first home completely in December 2018.

From July 2019 to July 2021 I leased the first home to my brother and his family at significantly less than market rent. 

I finally sold the first home in December 2021.

 

I am assuming that I do not meet the capital gains exclusion criteria of my first home being my primary residence for 2 out of the 5 years prior to sale because of the in-between-houses state from August to December 2018.

 

What I do not understand after reading publication 523 is whether the rental period (to immediate family at below market rent) affects my capital gains taxation and if so, how.

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Partial exclusion of capital gains on sale of home?

In Publication 523, did you read the following passage?:

 

Gain from the sale or exchange of your main home isn’t excludable from income if it is allocable to periods of non-qualified use. Non-qualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as your main home, with certain exceptions (see next).

 

See https://www.irs.gov/publications/p523#en_US_2021_publink100077085

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1 Reply

Partial exclusion of capital gains on sale of home?

In Publication 523, did you read the following passage?:

 

Gain from the sale or exchange of your main home isn’t excludable from income if it is allocable to periods of non-qualified use. Non-qualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as your main home, with certain exceptions (see next).

 

See https://www.irs.gov/publications/p523#en_US_2021_publink100077085

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